Overview

Extensive policy and guideline material has been developed for these infrastructure procurement models by the Inter-Jurisdictional Alliancing and Traditional Contracting Steering Committee.

The Committee draws representatives from the Treasury departments of Western Australia, Queensland, New South Wales, Victoria (the Chair) and the Australian Government (Department of Infrastructure and Transport). This material and other publications are presented here.

This page is structured as follows:

Alliance contracting – provides an introduction and a link to the national website that hosts the policy and guideline documentation published in 2011. This section also provides direct access to a more recent publication, Guidance note 6: ECI and other collaborative procurement models; and also refers to the pioneering benchmarking study, In Pursuit of additional value, and to the published paper, Alliancing in Australia; competing for thought leadership (2013).

Collaboration in contracting models – refers to extensive national research on tender strategies used in infrastructure projects that supports the broad use of collaboration in all contracting models.

National framework for traditional contracting of infrastructure – provides an introduction and the documents that compromise this framework.

The Inter-Jurisdictional Alliancing and Traditional Contracting Steering Committee – provides a brief description of this committee and its work.

Alliance contracting

Alliancing is a method of procuring, and sometime managing, major capital assets. Under an alliance contract, a state agency contractually works collaboratively with private sector parties to deliver the project.

Alliance contracting is characterised by a number of key features, which generally require the parties to work together in good faith, act with integrity and make best-for-project decisions. The alliance participants work as an integrated, collaborative team to deal with key project delivery matters.

Under alliance contracts, risks of project delivery are often jointly managed by the parties, although financial exposure lies mostly with the State.

When to use alliance contracting

An agency’s decision to use alliance contracting needs to be based on a strategic procurement analysis with a good understanding of which contracting model is most likely to best deliver value for money against business case objectives.

Normally, alliancing is used to deliver the larger, more complex and high-risk infrastructure projects (with capital costs exceeding $50 million) and where the client has particular capability to contribute its skills and expertise to deliver the project.

Projects suitable for potential delivery as alliances are generally characterised by one or more of the following factors:

The project has risks that cannot be adequately defined or measured in the business case or prior to tendering.

The cost of transferring project risks to the contractor is prohibitive.

The project needs to start as early as possible before the risks can be fully identified and/or project scope can be finalised, and the project client (as well as the project investor) is prepared to take the commercial risk of a sub-optimal price outcome.

The client has superior knowledge, skills, preference and capacity to influence or participate in the development and delivery of the project, including for example, in the development of the design solution and construction method.

Where taking a collective approach to assessing and managing project risks will produce, in special and rare circumstances, a better outcome than contracted allocation risk. (It should be noted, however, that in past practice the exposure of the project client to project risks in alliance contracts has been uncapped while that of the non-owner participants was capped.)

Alliance policy and guidance material

The policy and guidance material are aimed at departments and agencies undertaking alliancing contracts and other collaborative contracting models such as ECI.

They set out the Victorian Government’s minimum requirements for alliance contracting and other collaborative contracting models.

This Commonwealth website also provides the guide to alliance contracting and a number of topic specific guidance documents. These provide benchmark practices that will ensure departments and agencies satisfy the principles set out in the policy. This documentation includes:

Guide to alliance contracting

The guide has been prepared to provide consistent guidance on alliance contracting to departments and agencies that develop and own infrastructure projects. It sets out current leading practices for delivering infrastructure projects using alliance contracting.

Guidance notes

Guidance notes are provided on various special interest topics to assist departments and agencies in planning and reporting on their alliancing contracts.

Templates

The templates have been developed to be consistent with the National alliance contracting: Policy principles and the guidance material. They draw on leading practices from Western Australia, Queensland, New South Wales and Victoria.

They reflect the best practice from each state jurisdiction rather than replicate practice from any one jurisdiction. It is intended that the documents will provide project owners with a template which can then be tailored to reflect the nature and requirements of the specific project.

Caution is required as a number of clauses in this agreement do not reflect the policy positions approved by the Victorian Government.

Other published article

The insights arising from extensive experience and research undertaken in engaging with Australian agencies and contractors using the non price competitive model of alliance contracting, predominantly from 2004 to 2010, have been documented in the article, Tamburro N and Wood P (2013) Alliancing in Australia: competing for thought leadership, Proceedings of the ICE - Management, Procurement and Law, Volume 167, Issue 2, October 2013 pages 75 –82 (DOI: 10.1680/mpal.13.00012). The article can be found at www.icevirtuallibrary.com/content/journals

The abstract of the article is:

Clients need to be ever vigilant to maintain a central role in thought leadership for the procurement of infrastructure projects. This paper uses the case study of alliancing in Australia as a cautionary tale to illustrate how value for money can be eroded when clients concede thought leadership to suppliers. In the mid-1990s the alliance model of contracting was introduced to Australia. By approximately 2005 this alliancing model was a dominant method of infrastructure procurement. Thought leadership by suppliers (including advisors) quickly evolved a model based on the promise that, ‘Clients would receive enhanced value-for-money outcomes and no disputes with a culture-centric procurement model that avoided price competition’. It sounds naive and it was, as evidenced by substantial research sponsored by the various Australian state treasuries. In July 2011 the public sector took a thought leadership role and adopted a new National Alliance Contracting policy and guidelines. This second generation of the alliance model was founded on competition of intellectual effort and price. The story of alliancing in Australia demonstrates that thought leadership in the procurement of infrastructure projects cannot be ignored by clients.

Benchmarking study

During 2009 the Inter-Jurisdictional Alliancing Steering Committee (as it was then known) undertook research into the value-for-money outcomes achieved in past alliancing contracts and how it can be enhanced in future alliances. The resulting report, In pursuit of additional value in the Australian Public Sector, was published in October 2009.

Collaboration in contracting models

During 2011, Department of Treasury and Finance was engaged by the Commonwealth Department of Industry and Transport (DoIT) to undertake an extensive national research project on the Design & Construct (D&C) tender strategies used in infrastructure projects and on related issues.

As part of the research effort, over 50 meetings were held with senior practitioners in the delivery of infrastructure and building projects.

These individuals came from various sections of the infrastructure industry, including construction, engineering design and legal firms, public sector agencies and a few companies in the mining and process engineering sectors.

Central government departments involved in developing state and national level policies and guidelines for public sector practices were also consulted. These meetings were supplemented by five group sessions with key industry players that workshopped some of the key issues facing traditional procurement.

The investigation found three key challenges that must be satisfactorily addressed to deliver an optimal project outcome for both the client and the tenderer. These were:

people capability: always necessary to achieve optimal outcomes;

foundation success factors: these are tasks and activities that we should aim to get right every time, including providing quality tender documentation supporting the client’s requirements, project definition, the tender selection criteria and its application during evaluations, adequate timelines, enabling probity etc (see table 3, chapter 4 of Towards Agreed Expectations); and

effective collaboration: to enable a full and mature understanding of the client’s 'request for tender' and the contractor’s 'tender response. There was a common view that the presence of effective collaboration in the tendering process, irrespective of the contracting model used, would be of substantial benefit to all contracting parties. A key message being that effective collaboration is not the sole providence of alliance contracting.

In conducting this investigation, a number of opportunities were identified where further work would be of benefit, and which will promote improvements in the productivity of infrastructure delivery through traditional contracting.

These opportunities were the subject of the consultation paper released by DoIT in February 2012. Submissions closed in April 2012. The consultation paper outcomes resulted in the development of the National framework for traditional contracting of infrastructure.

National framework for traditional contracting of infrastructure

The National framework for traditional contracting of infrastructure has been initiated to document best practice to promote productivity improvements in the planning and contracting phase of major projects.

In the context of the framework, traditional contracting refers to those contracts that to varying degrees allocate construction and design risk to the suppliers (but are not alliances or PPPs).

The two primary categories of traditional contracting are:

Construct only (CO): the design has been undertaken by the client, and the supplier is responsible for constructing the works to the client’s design; and

Design and construct (D&C): generally a limited design has been undertaken by the client who then invites potential suppliers to tender on the basis of completing the client’s design and constructing to that design.

The research undertaken in 2011 and 2012 resulting in Towards agreed expectations, and the subsequent outcomes of the consultation paper, supported the development of a framework with focus on:

This is a best practices framework, providing a resource that individual jurisdictions can use to inform their own policy and guideline development for traditional contracting of infrastructure. (The framework does not address building projects.)

The documentation makes explicit statements that where there is a conflict in the guidance of this framework and jurisdictional policies and guidelines, the jurisdiction’s position will take precedence.

The exposure drafts of these documents were widely distributed for feedback. Comments closed on 28 June 2013. DTF has published the following drafts in an interim format. In due course they will be published by the Commonwealth Department of Infrastructure and Transport, with improved graphics and formatting, for the Commonwealth's Better Practice Framework.

To effectively address the emerging opportunities and issues in alliance and traditional contracting, a collaborative inter-jurisdictional approach has been undertaken.

The Inter-Jurisdictional Alliancing Steering Committee was established in early 2009 to pursue a number of joint initiatives, including the development of the policies, guidance material, templates and training programs pertaining to alliancing contracting. In 2011 the role of the Steering Committee was expanded to cover traditional contracting.

The Committee has representatives from the Treasury departments of Western Australia, Queensland, New South Wales, Victoria (the Chair) and from 2011 the Australian Government (Department of Infrastructure and Transport).

The role of the Committee concluded in 2014 with the finalisation of the National framework for traditional contracting of infrastructure.